WEBVTT - Not Confident on the U.S. Recovery or Dollar: BBH's Thin 0:00:01.360 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Swiney, along 0:00:04.120 --> 0:00:06.200 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.600 along with essential market moving news. Find the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple Podcasts or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.239 and on Bloomberg dot com. Prior to the pandemic, I 0:00:21.280 --> 0:00:24.040 think we were kind of used to seeing dollar strength 0:00:24.040 --> 0:00:26.680 here talking about the d X Y index trading at 0:00:26.760 --> 0:00:30.720 or near that level. Since over the last several months, 0:00:30.720 --> 0:00:33.320 pulled back to get a sense of where currencies are 0:00:33.360 --> 0:00:36.239 headed going forward. We love to chat with Dr Win Thin, 0:00:36.640 --> 0:00:40.000 global head currency strategy for Blown Brothers Harriman, based in 0:00:40.040 --> 0:00:42.920 New York City. Uh. Dr Thin, thanks so much for 0:00:43.040 --> 0:00:44.800 joining us here. Give us your sense of kind of 0:00:44.840 --> 0:00:47.680 the green back here versus some of the major trading 0:00:47.720 --> 0:00:50.960 currencies here as we think about lower interest rates for longer, 0:00:51.080 --> 0:00:54.319 the pandemic impact slower economic growth, How are you kind 0:00:54.320 --> 0:00:57.760 of positioning currencies right here? Sure? Well, first of all, 0:00:57.800 --> 0:00:59.320 thank you very much for having me if it's always 0:00:59.320 --> 0:01:02.080 a pleasure. Um, so, you know, if you do a 0:01:02.600 --> 0:01:05.760 uh look at the chart, weekly chart going back to 0:01:05.920 --> 0:01:09.200 about two thousand and fifteen, you'll see the dollars pretty 0:01:09.240 --> 0:01:12.800 much within those ranges. UM, you know, just as recently 0:01:12.840 --> 0:01:16.480 as uh, you know, March April, we're at you know, 0:01:16.520 --> 0:01:18.600 pretty much at the top of that range. So the 0:01:18.680 --> 0:01:21.840 speed of its decline has been has been noteworthy. UM. 0:01:21.880 --> 0:01:25.160 To me, it reflects two things. One is the aggressive 0:01:25.200 --> 0:01:30.000 FED easing zero rates and incredibly um fast expansion of 0:01:30.080 --> 0:01:34.760 balance year date, the balance she has expanded, uh, and 0:01:34.800 --> 0:01:38.360 now we've got some worries about reopening UM here in 0:01:38.440 --> 0:01:40.600 two three with the virus numbers still so bad. So 0:01:40.640 --> 0:01:43.160 those two things have really worked against dollar. To me, though, 0:01:43.200 --> 0:01:46.160 and I think I've mentioned this on on UM several 0:01:46.160 --> 0:01:48.800 times before, I still view this as a cyclical downturn, 0:01:48.920 --> 0:01:52.080 that is, UM, you know, between the monetary policy cycle 0:01:52.120 --> 0:01:57.120 and economic cycle. The cycle, the cyclical factors are against 0:01:57.160 --> 0:01:58.560 the dollar. And of course you have a lot of 0:01:58.600 --> 0:02:01.440 experts out there saying that that little decline, but I 0:02:01.480 --> 0:02:03.040 think it's way too only to say that right now. 0:02:03.040 --> 0:02:06.440 I I like, UM, I think the dollar will weaken 0:02:06.680 --> 0:02:08.520 into going into two four, but we quick bottom and 0:02:08.520 --> 0:02:16.240 two fourth the virus numbers start to get better. Well, 0:02:16.280 --> 0:02:17.840 I was just gonna say, what does that mean for 0:02:17.880 --> 0:02:20.840 the other currencies? Is there going to be debasement around 0:02:20.919 --> 0:02:25.640 the globe or you know what happens? Well, a couple 0:02:25.639 --> 0:02:29.000 of things. I think, Um, you know, you can't have 0:02:29.040 --> 0:02:31.480 everyone have a weaker currency, right so on the other 0:02:31.480 --> 0:02:33.440 step side of the coin with your dollar needs strong 0:02:33.520 --> 0:02:36.639 currency elsewhere. Now right now it's being expressed a lot 0:02:36.960 --> 0:02:40.360 in the currencies in Europe, Sterling in the euro as 0:02:40.360 --> 0:02:45.040 well as emerging markets. So at this point, um, the 0:02:45.120 --> 0:02:48.560 officials in Europe aren't really complaining about the strong currency. 0:02:48.560 --> 0:02:51.160 At this point, Um, they're seeing you know, they're remember 0:02:51.200 --> 0:02:52.560 there are there are a couple months ahead of us. 0:02:52.639 --> 0:02:54.800 They've been able to reopen albeit it uh, you know, 0:02:54.840 --> 0:02:57.200 it's body and they know having reverse from time to time. 0:02:57.240 --> 0:02:59.320 But they're a little bit further along in the economic cycles, 0:02:59.400 --> 0:03:00.520 so I think they can have a bit of a 0:03:00.720 --> 0:03:05.200 stronger currency. So you know, long run the dollar, weaker 0:03:05.280 --> 0:03:07.720 dollar could help the the U s econmy But really 0:03:07.800 --> 0:03:10.080 what I've been focusing on is with the loss of 0:03:10.080 --> 0:03:12.200 fiscal stillness. You know, I've seen studies that say that 0:03:12.720 --> 0:03:15.919 you know, the the enhanced the employment benefits was pumping 0:03:15.960 --> 0:03:18.359 somewhere anywhere between two and fifty billion to a trillion 0:03:18.360 --> 0:03:20.720 dollars where the steam was in the economy, and that's 0:03:20.840 --> 0:03:23.080 being a fell off a cliff. Um. The sooner we 0:03:23.120 --> 0:03:25.280 get that started, the better. But that's why I'm a 0:03:25.280 --> 0:03:27.679 bit negative on the dollar in the US economy. Two three, 0:03:27.680 --> 0:03:31.040 we have massive headwinds really between the virus and the 0:03:31.240 --> 0:03:35.880 loss of fiscal stimulus. So are you not particularly optimistic 0:03:35.920 --> 0:03:40.960 that Congress will deliver a fourth round of stimulus? Well, okay, 0:03:41.000 --> 0:03:43.560 I was confident a couple of weeks going on because 0:03:43.560 --> 0:03:45.240 I thought, okay, look, we don election coming out. Who 0:03:45.320 --> 0:03:47.920 wants to play these games? But both sides of dug 0:03:47.960 --> 0:03:51.720 in much longer I expected. So at this point, Um, 0:03:51.760 --> 0:03:53.240 I think we'll know more with the weekend. I'm not 0:03:53.240 --> 0:03:55.440 sure if you've following it, but the House was called 0:03:55.480 --> 0:03:59.680 back for emergency stat sessions to vote on postal UH 0:04:00.080 --> 0:04:03.280 service aid and protections. And I know that some of 0:04:03.320 --> 0:04:06.560 the in some of the people in um speaker closest 0:04:06.600 --> 0:04:09.880 caucus been pushing her to use this opportunity to restart 0:04:09.920 --> 0:04:13.080 the talks. So you know, it's it's a fluid situation, 0:04:13.120 --> 0:04:16.359 but you know that's feeling that they'll eventually get something past, 0:04:16.880 --> 0:04:20.720 probably something watered down. Um, so again another reason to 0:04:20.760 --> 0:04:22.480 be a little bit cautious about the U. S. Economy. 0:04:22.560 --> 0:04:24.640 But um, you know this is not the time we're 0:04:24.640 --> 0:04:27.520 playing politics right now. When I've been curious for several 0:04:27.560 --> 0:04:32.040 weeks now about something slightly you know, it's definitely not 0:04:32.160 --> 0:04:34.800 completely dull or related. And you used to cover emergin 0:04:34.839 --> 0:04:36.680 markets and frontier markets and so on, so I know 0:04:36.760 --> 0:04:39.880 you know all about currencies in for example, the Middle East, 0:04:40.240 --> 0:04:43.040 where we already had a bit of a diary situation 0:04:43.120 --> 0:04:47.600 before the very route explosion. I'm curious, how are all 0:04:47.640 --> 0:04:51.680 these countries managing given that there is things to do 0:04:51.720 --> 0:04:55.880 with each one that's making life more difficult, and coronavirus 0:04:55.880 --> 0:04:59.840 acause all of them. Yes, so it's funny you used 0:04:59.800 --> 0:05:03.440 to I just part out a piece yesterday basically pointing 0:05:03.440 --> 0:05:06.359 out that look, with zero rates everywhere, you know, no 0:05:06.360 --> 0:05:07.719 one has any cover. You know, I used to have 0:05:07.800 --> 0:05:09.479 no If you know, Brazili had rates around towel percent 0:05:09.520 --> 0:05:11.440 that would give you a litit of cover, you know, say, okay, 0:05:11.440 --> 0:05:13.080 well I'm not crazy what's going on in Brazil, but 0:05:13.400 --> 0:05:16.040 I get twelve percent yield That I'll go Now, we're 0:05:16.080 --> 0:05:18.360 almost all at zero or near zero rates, so we 0:05:18.440 --> 0:05:19.960 could go back to the square one where we're all 0:05:20.000 --> 0:05:22.479 focusing on the fundamentals. Um. And so I think when 0:05:22.560 --> 0:05:25.599 he continued differentiation across e m uh, you know, Brazil, 0:05:25.720 --> 0:05:27.680 South Africa, Turkey though, those are all the high heels 0:05:27.680 --> 0:05:29.240 that used to sort of benefit and risk on and 0:05:29.240 --> 0:05:32.320 they just have it. Um. So my advice to emergent 0:05:32.320 --> 0:05:35.159 market investors is just due to homework. Um. You know, 0:05:35.240 --> 0:05:37.360 I think we're we're past the worst, but you know 0:05:37.720 --> 0:05:40.520 we're not. We're past the stage where everyone's buying em 0:05:40.520 --> 0:05:43.240 Willy NAILI right, it's very differentiated, and I think that's 0:05:43.320 --> 0:05:46.520 virgency can continue. But if you don't mind, though, just 0:05:46.880 --> 0:05:50.760 commenting on how these countries will survive this. So, yes, 0:05:50.880 --> 0:05:54.960 the opportunities for investors maybe, but what are these countries 0:05:55.000 --> 0:05:57.720 all going to sort of experience founding an extreme poverty 0:05:57.760 --> 0:06:03.359 at this point? Well that yeah, that's the big question. Um. 0:06:03.400 --> 0:06:05.320 You know, I think that the obviously the more developed 0:06:05.320 --> 0:06:07.600 economies are are will be okay. You know, I'm not 0:06:07.640 --> 0:06:11.680 worried about what's going on in Eastern Europe. Obviously Asia 0:06:11.800 --> 0:06:14.839 much more, much better position. But yes, South, you know, 0:06:15.120 --> 0:06:19.080 I think Africa and parts of um, you know, parts 0:06:19.120 --> 0:06:21.640 of South America are are are really struggling. I think 0:06:21.640 --> 0:06:23.120 that's why the I m F and World Bank of 0:06:23.320 --> 0:06:25.640 have really been much open up the floodgates. So look, 0:06:25.680 --> 0:06:28.839 forget about you know, conditionality, forget about you know, reformers. 0:06:28.880 --> 0:06:30.800 We're just giving you money to to sort of get 0:06:30.800 --> 0:06:33.080 through this. Um. You know, for a lot of these countries, 0:06:33.080 --> 0:06:35.160 you know, especially the Middle least higher oil crisis would 0:06:35.200 --> 0:06:38.440 be a big plus. UM and you know, they stabilized. 0:06:38.480 --> 0:06:40.080 But you know, I think there's still some concerns about 0:06:40.120 --> 0:06:42.560 the global economy. You know, I think China's doing okay, 0:06:42.600 --> 0:06:45.520 but um, you know, there's still it's it's pretty clear 0:06:45.520 --> 0:06:46.880 that this is not gonna be that the Class D 0:06:47.040 --> 0:06:48.800 shape of cover. We you you know, we're gonna take like 0:06:48.839 --> 0:06:51.920 sort of it's more like two steps forward, one step back. UM. 0:06:52.000 --> 0:06:54.680 And that's that's that's gonna be tough. And I think, uh, 0:06:54.720 --> 0:06:56.600 you know, the weaker links in the E M are 0:06:56.680 --> 0:07:01.040 certainly gonna stuffer. Dr Win real quick thirty skins Japan, 0:07:01.040 --> 0:07:04.080 how do you feel about the end right here? Well, 0:07:04.560 --> 0:07:07.400 Japan economy wises it's been one of the LAGOD that's 0:07:07.400 --> 0:07:10.160 it's actually even underploying the US that's been very, very disappointing. 0:07:10.160 --> 0:07:12.640 In two three you have to reimpos some lockdown, but 0:07:12.680 --> 0:07:15.520 even before that the recovery has been very spotty. So 0:07:15.760 --> 0:07:18.800 I look for another umlug of stimulus. You know, obvious 0:07:18.880 --> 0:07:21.880 popular areas has been plummeting, so I think we've got 0:07:21.840 --> 0:07:25.200 another slug of fiscal stimus. Banks Japan hold given this 0:07:25.400 --> 0:07:27.320 um sort of you know, risk on, risk off, and 0:07:27.360 --> 0:07:29.880 I think Doligans having trouble really breaking about one those six, 0:07:30.000 --> 0:07:32.200 So it's gonna be pi stetins one or four, one 0:07:32.280 --> 0:07:34.800 or six rangs for a while. Dr Winton, thank you 0:07:34.880 --> 0:07:37.240 so much for joining us. Dr Winton, global head of 0:07:37.240 --> 0:07:40.560 Currency Strategy at Brown Brothers Harriman UH based in New 0:07:40.640 --> 0:07:44.520 York City, which appreciate on getting his thoughts on currency. 0:07:45.840 --> 0:07:48.640 Chris Lou served as Deputy Secretary of Labor during the 0:07:48.680 --> 0:07:52.520 Alhama administration. He was a delegate to this week's Democratic Convention. 0:07:52.840 --> 0:07:55.520 He is now Senior Fellow at the University of Virginia 0:07:55.680 --> 0:07:59.200 Miller Center. Chris, thanks for joining. So it was a 0:07:59.280 --> 0:08:03.320 very emotive speech. It was a very calm and I 0:08:03.360 --> 0:08:07.320 guess an effort being uplifting type of speech. But what 0:08:07.400 --> 0:08:10.400 about policy? When do we hear what Joe Biden's policies 0:08:10.440 --> 0:08:16.640 are on everything from healthcare to schools to coronavirus. Well, 0:08:16.680 --> 0:08:19.320 I think you heard a lot last night about how 0:08:19.360 --> 0:08:22.480 he would deal with a coronavirus pandemic. And I think 0:08:22.680 --> 0:08:25.400 over the last a couple of weeks he's been doing 0:08:25.400 --> 0:08:28.360 a series of policy addresses, not just on healthcare, but 0:08:28.440 --> 0:08:30.880 I saw the economy as well. You know, last night speech, 0:08:30.880 --> 0:08:34.480 in my mind, was last about policy than about values. Uh, 0:08:34.679 --> 0:08:37.000 you know, his goal was the vice president's goal was 0:08:37.080 --> 0:08:40.800 to convey a positive message, a unifying message. You know. 0:08:40.800 --> 0:08:43.640 I thought he did a nice job of weaving in 0:08:43.720 --> 0:08:47.360 his own biography and how his biography shapes the way 0:08:47.400 --> 0:08:49.520 that he looks at the country and he looks at government. 0:08:49.600 --> 0:08:52.439 So I do think you'll see more of those policy rollouts. 0:08:52.480 --> 0:08:54.680 But I candidly, you know, I don't know that this 0:08:54.800 --> 0:08:57.240 election is really going to turn on policy one way 0:08:57.320 --> 0:09:00.400 or another. All right, Chris, So if it's not necessarily 0:09:00.400 --> 0:09:03.400 going to turn on policy, what message do you think 0:09:03.480 --> 0:09:06.679 or what strate did you expect the Democrats not just 0:09:06.800 --> 0:09:09.040 for the presidency but up and down ticket to really 0:09:09.040 --> 0:09:12.200 focus on this election season. Well, look, I mean, and 0:09:12.240 --> 0:09:14.680 this is not surprising when you've got an incumbent on 0:09:14.720 --> 0:09:17.920 the ballot. It really is a referendum on Donald Trump. 0:09:17.960 --> 0:09:23.120 And where Democrats are aiming is using the coronavirus crisis 0:09:23.320 --> 0:09:26.559 as an example of the failed leadership of this administration. 0:09:26.600 --> 0:09:28.800 And you know, obviously there's a lot of other things 0:09:28.800 --> 0:09:31.959 they can point to, both domestically and h and overseas, 0:09:32.000 --> 0:09:34.560 but that that's sort of what they're holding up as 0:09:34.880 --> 0:09:37.760 the prime example. You know. Look, they will obviously have 0:09:37.920 --> 0:09:41.920 opportunities to contrast on things like healthcare, where Democrats have 0:09:42.000 --> 0:09:45.600 a big political advantage, particularly with the Supreme Court considering 0:09:45.640 --> 0:09:48.000 the fate of the Affordable Care Act. But really they're 0:09:48.040 --> 0:09:51.560 pointing the straight up Donald Trump and asking voters do 0:09:51.600 --> 0:09:54.760 you want four more years of him? How do you 0:09:54.760 --> 0:09:57.320 think that he did last night in the sense of 0:09:57.360 --> 0:10:01.920 appearing fully with those young vital you know, on somebody 0:10:01.960 --> 0:10:05.280 that you could debate. You know, I look, I I've 0:10:05.679 --> 0:10:08.680 known the Vice President for over ten years. I worked 0:10:08.720 --> 0:10:10.240 closely with him in the White House, and I've seen 0:10:10.320 --> 0:10:12.560 him give a lot of speeches. You know, this was 0:10:12.760 --> 0:10:15.520 hands down the best speech I've seen him give. Um, 0:10:15.559 --> 0:10:18.040 it was a different Joe Biden than I think people 0:10:18.200 --> 0:10:22.360 remember from ten years ago. Uh, he's more mature, he's 0:10:22.400 --> 0:10:25.840 more calm, he's more of a statesman. Like you know, 0:10:26.000 --> 0:10:29.520 earlier in his tenure, the Vice President did have a 0:10:29.720 --> 0:10:31.440 you know, a tendency to kind of go off track 0:10:31.480 --> 0:10:34.560 a little bit. Obviously, you know, in a prepared speech 0:10:34.640 --> 0:10:37.400 like this, Um, it's easier to sort of stay focused. 0:10:37.440 --> 0:10:39.600 But Yeah, obviously a huge challenge is going to be 0:10:40.120 --> 0:10:43.920 in the debates coming up starting in September. Hey, how 0:10:43.920 --> 0:10:47.040 about christ As we think about down tickets, think about 0:10:47.040 --> 0:10:52.640 the Senate. What's the expectation, um about the Senate? Can 0:10:52.760 --> 0:10:55.400 the Democrats? They did? The Democrats feel that they can 0:10:55.679 --> 0:10:58.600 really take back the Senate. You know, I think they 0:10:58.600 --> 0:11:00.319 really do. And I think that was one of the 0:11:00.440 --> 0:11:04.080 overum writing themes of the convention is to have really 0:11:04.120 --> 0:11:06.440 kind of a big ticket, a big tent, which is 0:11:06.440 --> 0:11:09.400 why you saw everyone from you know, John Kasik to 0:11:09.520 --> 0:11:12.800 Bernie Sanders and everyone in between coming together. And I 0:11:12.840 --> 0:11:14.599 think when you look at the kind of races that 0:11:14.640 --> 0:11:19.080 are being run in places like Colorado, Arizona, North Carolina, UM, 0:11:19.120 --> 0:11:21.120 they're really kind of focused on the bread and butter 0:11:21.200 --> 0:11:24.120 issues and not just healthcare, but you know the economy 0:11:24.160 --> 0:11:27.000 as well. And again so I think, you know, having 0:11:27.200 --> 0:11:29.800 this big ticket approach at the top, I think helps 0:11:29.840 --> 0:11:33.679 a lot of these um down ticket races, especially when 0:11:33.720 --> 0:11:39.720 you start to get into places like Iowa, potentially Georgia, Montana, 0:11:39.760 --> 0:11:42.960 which are reddish states. And I think having that big 0:11:42.960 --> 0:11:45.199 tent approach is going to be helpful to those Democratic 0:11:45.240 --> 0:11:49.840 candidates that said Ms McConnell will do everything in his 0:11:49.960 --> 0:11:53.040 power and I mean everything and his power to have 0:11:53.200 --> 0:11:56.480 that not happen. Will he be able to stop, as 0:11:56.520 --> 0:12:00.280 you know, using any kind of stratagy? Do you do 0:12:00.320 --> 0:12:03.320 you think, Chris Well, look, I mean we all should 0:12:03.320 --> 0:12:05.960 be concerned about what's happening with the Post Office right 0:12:06.000 --> 0:12:08.120 now and their hearings going on today and Monday. To 0:12:08.200 --> 0:12:10.559 look at what all of that means. You know, people 0:12:10.640 --> 0:12:12.320 need to come up with the strategy of how they're 0:12:12.320 --> 0:12:14.640 going to vote. Think broadly in terms of where MITTI 0:12:14.720 --> 0:12:16.880 connell is. Yeah, I obviously he will try to do 0:12:16.920 --> 0:12:20.400 anything as well Democrats, but ultimately these kind of elections 0:12:20.400 --> 0:12:23.240 tend to kind of go in waves and and ultimately 0:12:23.320 --> 0:12:26.800 it's where the president's approval rating is and what people's 0:12:27.040 --> 0:12:29.080 perceptions of him are that I think will not only 0:12:29.080 --> 0:12:32.400 affect his race, but also the battle for that Senate 0:12:32.440 --> 0:12:36.839 and House as well. So, Chris Kamala Harris, what's your 0:12:36.840 --> 0:12:40.880 take on the selection of the senator from California. Well, 0:12:40.920 --> 0:12:43.800 I think, first of all, she's supremely qualified. She has 0:12:43.840 --> 0:12:46.559 held you know, not only sederal, state and local offices. 0:12:46.800 --> 0:12:49.920 But I think it's importantly the bidens. You provide jolt 0:12:50.000 --> 0:12:52.439 of enthusiasm, and you've seen that of the past ten 0:12:52.520 --> 0:12:56.280 days with the Democratic base. Now, probably it doesn't ultimately 0:12:56.360 --> 0:13:00.240 translate into anywhere votes for the Biden Harris ticket, but 0:13:00.360 --> 0:13:02.160 what it does do is get people were like, you 0:13:02.160 --> 0:13:03.880 know what, I'll vote for Buyden, but I may not 0:13:04.120 --> 0:13:06.040 you know, write a check. I may not go out 0:13:06.200 --> 0:13:08.880 and uh um and help, you know, phone bank or 0:13:08.960 --> 0:13:10.920 text bank. And I think it will get a lot 0:13:11.000 --> 0:13:13.200 of people more energized. And I think that's the one 0:13:13.320 --> 0:13:18.160 area demographically where you saw Biden's UH numbers kind of lagging. 0:13:18.240 --> 0:13:21.240 It's among people of colors and younger voters. I think 0:13:21.280 --> 0:13:24.959 that her selection really helps them on both of those fronts. Chris, 0:13:25.040 --> 0:13:27.280 Right now, the president is obviously lagging in the polls, 0:13:27.480 --> 0:13:29.480 but as I mean, as soon as we start to 0:13:29.480 --> 0:13:32.400 hear Biden speaking a lot again, you know, do you 0:13:32.440 --> 0:13:37.480 imagine that that gap will stay as wide? You know, 0:13:38.320 --> 0:13:40.640 it's hard to say. Um, you know, I don't think 0:13:40.679 --> 0:13:43.559 this is going to be a traditional campaign season. I mean, 0:13:43.640 --> 0:13:46.400 I think what we've seen over the last couple of 0:13:46.440 --> 0:13:47.840 months I think is what we're going to see over 0:13:47.880 --> 0:13:50.480 the next couple of months. And I think that, certainly, 0:13:50.679 --> 0:13:52.840 you know, makes it challenging for both of us to 0:13:52.880 --> 0:13:55.480 get their message out. I also think we're operating and 0:13:56.040 --> 0:14:00.280 I'm such a polarized electorate right now. They're really aren't 0:14:00.280 --> 0:14:03.120 that many undecided voters, and you know, look at the margins. 0:14:03.400 --> 0:14:06.160 You know, what happens to the Republican Convention, probably what 0:14:06.240 --> 0:14:09.080 happens in the debates will have some difference. But people forget, 0:14:09.280 --> 0:14:11.559 voting really starts pretty soon. You know. I live in 0:14:11.600 --> 0:14:14.920 the state of Virginia, and our voting starts on September eighteenth, 0:14:15.000 --> 0:14:18.360 and so a lot of these late developing um UM 0:14:18.559 --> 0:14:21.400 issues or or or events may not have an effect 0:14:21.440 --> 0:14:24.520 on a lot of people. Chris Leu, thanks so much 0:14:24.520 --> 0:14:27.840 for joining us. We always appreciate getting your thoughts in perspective. 0:14:27.920 --> 0:14:32.520 Chris lu Senior fellow at the University of Virginia Miller Center, 0:14:33.040 --> 0:14:37.800 also a former member of former Deputy Secretary of Labor 0:14:37.880 --> 0:14:40.480 during the Obama administration as well. It was also a 0:14:40.600 --> 0:14:44.400 delegate to this week's Democratic conventioned so obviously has just 0:14:44.680 --> 0:14:47.160 really deep knowledge there of what's going on within the 0:14:47.680 --> 0:14:50.480 Democratic Party Vanni. But I think most Democrats feel like 0:14:50.720 --> 0:14:53.800 they did a pretty good job this week. Absolutely, and 0:14:54.000 --> 0:14:56.520 it'll be interesting to see the r n Z next 0:14:56.560 --> 0:14:59.360 week after the virtual extravaganza that we saw this week, 0:14:59.400 --> 0:15:01.600 and it was really pretty well done. I mean, I 0:15:01.600 --> 0:15:05.240 think after a couple of small hiccups on Monday night, Tuesday, 0:15:05.240 --> 0:15:07.680 Wednesday and Thursday, when pretty smoothly, and it must have 0:15:07.680 --> 0:15:11.120 been a huge technical exercise. Yeah, and it's I was 0:15:11.200 --> 0:15:13.200 kind of amazing, you know, having you know how it 0:15:13.200 --> 0:15:15.640 went off so well from a technical perspective. So give 0:15:15.720 --> 0:15:20.640 them credit to the text traders. What keeps them up 0:15:20.640 --> 0:15:23.840 at night? What keeps them wondering about this market? Well, 0:15:23.920 --> 0:15:26.720 let's ask somebody who studies them and is able to 0:15:26.760 --> 0:15:30.360 tell us with absolute scientific accuracy what exactly it is 0:15:30.440 --> 0:15:33.360 that motivates traders day by day these days. Randy Frederick 0:15:33.440 --> 0:15:36.080 is VP of Trading and Derivatives at the Schwab Center 0:15:36.120 --> 0:15:39.240 for Financial Research, more than twenty five years experienced in 0:15:39.280 --> 0:15:44.400 equity markets. But also there's there's a Trader Pulse survey 0:15:44.440 --> 0:15:48.160 that the Center puts out, and I'm very curious, Randy, 0:15:48.160 --> 0:15:50.880 what is it saying these days? The markets keep going 0:15:51.000 --> 0:15:55.120 up and yet you know, everything is crumbling all around us. Well, 0:15:55.160 --> 0:15:57.560 the most recent survey data, which we just got back 0:15:57.600 --> 0:15:59.920 a couple of days ago, follows the survey we do 0:16:00.040 --> 0:16:02.760 it back in in March, and turns out that people 0:16:02.800 --> 0:16:06.520 have become more bullish, which to some extent isn't terribly surprising. 0:16:06.520 --> 0:16:11.840 I mean, the SPS rebounded since it bottomed on March then, 0:16:11.840 --> 0:16:14.600 ASDEX is obviously doing even better than that. So what 0:16:14.640 --> 0:16:16.960 we find is that momentum in the market oftentimes does 0:16:17.320 --> 0:16:19.560 make people feel a little bit better, even though there 0:16:19.560 --> 0:16:21.760 may be a better buying opportunity when it's at the bottom. 0:16:21.800 --> 0:16:23.920 No one really knows that we're at the bottom until 0:16:24.000 --> 0:16:26.960 we're already past it. So, Randy, one of the things 0:16:26.960 --> 0:16:29.360 that you know, investors are asking themselves these days, and 0:16:29.400 --> 0:16:31.640 we hear a lot from fund managers, is you know, 0:16:31.720 --> 0:16:34.600 for the remainder of this year, perhaps going into if 0:16:34.640 --> 0:16:38.160 you can kind of figure on some kind of the 0:16:38.520 --> 0:16:41.160 other side of this pandemic is how to play it. 0:16:41.200 --> 0:16:43.400 Do I stick with the growth stocks that have worked 0:16:43.440 --> 0:16:46.400 for me, or do I maybe rotate into value? What's 0:16:46.440 --> 0:16:51.440 your survey suggest Well, sometimes people do that. I mean, 0:16:51.480 --> 0:16:53.400 the thing that's important to keep in mind is that 0:16:53.880 --> 0:16:56.320 we don't really know when or if we're going to 0:16:56.400 --> 0:16:58.360 get fully out of this. We we open, we have 0:16:58.480 --> 0:17:01.040 plenty of reason to believe that will probably have a 0:17:01.120 --> 0:17:03.960 vaccine at some point, maybe not until the beginning of 0:17:04.040 --> 0:17:07.080 next year. UM, and if that happens, of course, what 0:17:07.440 --> 0:17:09.960 has been the leader in the last bull market, which 0:17:10.040 --> 0:17:13.080 lasted over eleven years, as you know, UM will likely 0:17:13.119 --> 0:17:16.720 continue to be the leaders going forward. The one sector 0:17:16.760 --> 0:17:19.679 that is difficult are the one area that I think 0:17:19.720 --> 0:17:21.840 people need to be a little cautious about if they're 0:17:21.880 --> 0:17:24.760 trying to position themselves for when we come out of 0:17:24.800 --> 0:17:28.240 the virus is those stocks that have benefited primarily because 0:17:28.280 --> 0:17:31.560 of it. UM. Obviously, most people are staying at home, 0:17:31.920 --> 0:17:35.080 many people are working at home. Our leisure activities have 0:17:35.160 --> 0:17:38.639 been curtailed dramatically, if not completely eliminated, and there are 0:17:38.640 --> 0:17:42.120 a number of stocks that have been benefited from that 0:17:42.160 --> 0:17:45.960 particular trend. While I do think that more people will 0:17:46.000 --> 0:17:48.160 probably work at home after the virus than they ever 0:17:48.200 --> 0:17:50.520 did previous to that, it's going to be nowhere near 0:17:50.520 --> 0:17:52.879 what we see right now. So some of those that 0:17:52.880 --> 0:17:55.800 have benefited greatly are likely to find a little bit 0:17:55.840 --> 0:17:57.800 of softness, But the ones that have been the leaders 0:17:57.840 --> 0:18:01.760 all along throughout the cyclical periods will likely continue to 0:18:01.800 --> 0:18:04.359 be the leaders going forward once we get out of this. 0:18:06.119 --> 0:18:11.320 What sectors will be the most volatile, do traders think? Well? 0:18:11.359 --> 0:18:14.080 Traders have told us that they believe the volatility is 0:18:14.160 --> 0:18:18.600 likely UM to get to be the most, probably in financials, 0:18:18.600 --> 0:18:21.040 which is interesting and part of the reason I think. Obviously, 0:18:21.240 --> 0:18:25.000 financials have been UM the second worse performer year to date, 0:18:25.040 --> 0:18:27.080 and part of the reason for that is the fact 0:18:27.119 --> 0:18:30.080 that UH interest rates are at zero, and as you recall, 0:18:30.200 --> 0:18:33.399 j Palell said, not only UM are we not raising rates, 0:18:33.400 --> 0:18:36.080 we're not even thinking about thinking about raising rates, And 0:18:36.119 --> 0:18:38.520 of course that means not only are rates going to 0:18:38.560 --> 0:18:40.320 be zero by the end of this year, they're likely 0:18:40.359 --> 0:18:42.000 to be zero by the end of next year and 0:18:42.040 --> 0:18:46.000 perhaps even time after that. Financials, for the most part, 0:18:46.160 --> 0:18:48.639 make a large portion of their revenue from the interest 0:18:48.720 --> 0:18:50.639 rate spread, and as the spread as the race go 0:18:50.760 --> 0:18:54.840 down and stay at or near zero, that spread between 0:18:54.920 --> 0:18:58.240 what they pay on balances and what they charge on 0:18:58.320 --> 0:19:00.679 loans gets compressed, and so it is just simply not 0:19:00.720 --> 0:19:04.000 the opportunity there. On the positive side, though, for financials, 0:19:04.160 --> 0:19:06.600 when markets are volatile, trade volumes tend to go up, 0:19:06.600 --> 0:19:09.439 and we have seen that here and recently so. But 0:19:09.440 --> 0:19:11.040 the interest rate spreads a bigger piece of it, and 0:19:11.040 --> 0:19:13.199 it affects a larger number of them. So that's the 0:19:13.200 --> 0:19:15.440 one they're most concerned about. In the second one, um 0:19:15.560 --> 0:19:18.600 is health care. Health Care has been a has been 0:19:18.640 --> 0:19:22.960 the third best performer year to date, but healthcare always 0:19:23.119 --> 0:19:25.520 has uncertainty when we have an election. You saw a 0:19:25.560 --> 0:19:28.800 similar trend in healthcare prior to the two thousand and 0:19:28.840 --> 0:19:32.240 sixteen election. There's a lot of discussion on both sides, 0:19:32.960 --> 0:19:35.800 both from both candidates about how they would like to 0:19:35.920 --> 0:19:40.080 change health care, and so it creates a level of uncertainty. 0:19:40.119 --> 0:19:41.679 It's not so much that they're sure it's going to 0:19:41.680 --> 0:19:44.359 go down. It's that they're not sure what's going to happen, 0:19:44.359 --> 0:19:47.159 and that is actually the exact definition of volatility. We 0:19:47.200 --> 0:19:50.639 know it's going to move, we just don't know which direction. So, Randy, 0:19:50.720 --> 0:19:53.760 from your survey work, what's the economic backdrop that most 0:19:53.760 --> 0:19:57.920 traders are kind of thinking about right now? Well, I mean, 0:19:57.960 --> 0:20:00.600 we ask traders what they think the shape the recovery 0:20:00.640 --> 0:20:03.680 will be. But sometimes that one's a little difficult to decipher. 0:20:03.680 --> 0:20:06.040 And the reason I say that is that people have 0:20:06.080 --> 0:20:09.680 a tendency to to equate the market with the economy, 0:20:09.800 --> 0:20:11.840 and the two aren't the exact same thing. Even people 0:20:11.880 --> 0:20:13.520 at the high levels of government do that on a 0:20:13.520 --> 0:20:18.200 regular basis. I often remind people that the economy tends 0:20:18.240 --> 0:20:21.240 to run about six to eighteen months behind the markets, 0:20:21.560 --> 0:20:23.960